Posted on 05 Jan 2015
SteelGuru’s
Market Intelligence Service PS14 on December 19th vide an article “Rumors of
Chinese VAT rebate adjustment on steel exports surface again” had reported that
a new wave of rumours in this regard has started making rounds with expectation
of some announcement in January making Chinese steel exporters cautious of
finalizing new deals
As expected, Chinese government has announced adjustment in VAT rebate on steel
export on New Year eve. According to a release on Chinese government's Finance
Ministry website on Wednesday December 31st, China will remove the export tax
rebate on those boron added steel products that cause pollution during
production. While the details are awaited, it is heard that VAT rebate on all
Boron Added steel have been made nil except for HR.
The total blockage of Boron added steel export route without removing export
tax on mild steel would push FOB levels bringing smile to steel mills in other
parts of the world. The VAT rebate amount for various Boron Added steel
products on current FOB prices for reference is as under:
|
Item |
FOB |
VAT % |
Amount |
|
Rebar |
400 |
9.00% |
36 |
|
Wire Rod |
415 |
9.00% |
37 |
|
Plates |
455 |
9.00% |
41 |
|
HR |
455 |
9.00% |
41 |
|
CR |
530 |
13.00% |
69 |
|
HDG |
595 |
13.00% |
77 |
|
PPGI |
670 |
13.00% |
87 |
In USD per tonne
Incidentally, China is probably the only country to have a tax structure on
exports as most countries do not charge any taxes on goods destined overseas.
The old structure on Boron added Alloy Steel was:
|
Item |
Export Tax |
VAT Rebate |
|
Square Bars |
0.00% |
13.00% |
|
Rebar/Wire Rod |
0.00% |
9.00% |
|
HR/Plates |
0.00% |
9.00% |
|
CR/HDG/Coated |
0.00% |
13.00% |
|
Item |
Export Tax |
VAT Rebate |
|
Billets |
25.00% |
0.00% |
|
Rebar/Wire Rod |
15.00% |
0.00% |
|
HR/Plates |
0.00% |
0.00% |
|
CR/HDG/Coated |
0.00% |
0.00% |
% on FOB Value
The tax structure for Mild Steel exports from China:
|
Item |
Export Tax |
VAT Rebate |
|
Billets |
25.00% |
0.00% |
|
Rebar/Wire Rod |
15.00% |
0.00% |
|
HR/Plates |
0.00% |
0.00% |
|
CR/HDG/Coated |
0.00% |
0.00% |
% on FOB Value
Chinese steel mills are in full throttle on steel export front with November
volumes touching almost 10 million tonnes and it is expected that December
exports would be at similar levels. It is estimated that almost 35-40% of
export volumes are of Boron Added steel. Thus it would be interesting to see
that how Chinese steel mills adjust export volumes in this scenario or find
some other route soon to maintain export volumes. However, the Chinese export
volumes are certain to reduce in coming months as this move breaks a well-oiled
mechanism
The immediate implementation would also put many export deals in jeopardy and
it would be interesting to see how the buyers and sellers settle the dispute
On the other hand, dip in export volumes would lead to higher domestic
availability putting further pressure on Chinese domestic prices, which are
already at less than 50% of pre 2008 financial crisis in July 2008
